A vicious downward spiral among banks in which each institution's failure increases the likelihood that another will fail is a(n):
A)asset bubble.
B)maturity transformation.
C)multiplier effect.
D)financial contagion.

Question

Quizplus · Accepted Answer

Financial contagion refers to the spread of financial distress or market disruptions from one market or institution to another, usually as a result of interlinked relationships or because of a loss of confidence. It’s a vicious downward spiral that can increase the likelihood of failures in other institutions, as their ability to access liquidity, funding or capital decreases.

A Vicious Downward Spiral Among Banks in Which Each Institution's